2010 ANNUAL REPORT Our Mission That men and women may work in safety and that they, their families and their communities may live in health throughout the world. Our Vision About the Cover To be the leading innovator and provider of quality safety Conceptualized, designed and engineered within 18 months, and instrument products and services that protect and improve the Altair 4X Multigas Detector with XCell Sensors represents people’s health, safety and the environment. a breakthrough product platform from which MSA and our customers will benefit for years to come. But unlike past To satisfy customer needs through the efforts of motivated, innovations, it’s not just the hardware that makes this product involved, highly trained employees dedicated to continuous so special. As illustrated in the X-ray image on the cover, improvement in quality, service, cost, value, technology it’s what’s inside that counts! and delivery. Through extensive global Voice-of-Customer research, key Business of MSA product differentiators — such as a longer sensor life and a 40 percent faster response time — were designed into XCell Sensors MSA is in the business of developing, manufacturing and to bring greater value to the customer while driving greater selling innovative products that enhance the safety and health return for MSA’s shareholders. of workers throughout the world. Critical to MSA’s mission is a clear understanding of customer processes and safety needs. When installed in gas detection instruments like the Altair 4X MSA dedicates significant resources to research which allows Detector, XCell Sensors save the customer thousands of dollars the company to develop a keen understanding of customer over the lifetime of the instrument. With these and many other safety requirements for a diverse range of markets, including new-to-the-industry advantages, it is no surprise the Altair 4X the fire service, law enforcement, construction, public utilities, Detector with XCell Sensor technology is helping MSA gain mining, chemical, petroleum, HVAC, hazardous materials countless competitive conversions globally, particularly remediation, military and retail. MSA’s principal products, each in the oil, gas and petrochemical market. It’s also one more designed to serve the needs of these target markets, include reason why the XCell Sensor platform was named MSA’s 2010 respiratory protective equipment, thermal imaging cameras, Product of the Year. To learn more about this exciting innovation, gas and flame detection instruments, ballistic protection, as well visit our Website at www.msanet.com/Altair4X/. as head, eye, face, hearing and fall protection products. MSA was founded in 1914 by John T. Ryan and George H. Deike, two mining engineers who had firsthand knowledge of the terrible human loss that was occurring in underground coal mines at that time. Their knowledge of the mining industry provided the foundation for the development of safety equipment to better protect underground miners. While the range of markets served by MSA has expanded greatly over the years, the founding philosophy of understanding customer safety needs and designing innovative safety equipment solutions remains unchanged. MSA is headquartered in Cranberry Township, Pennsylvania, with operations employing 5,200 associates throughout the world. A publicly held company, MSA’s stock is traded on the New York Stock Exchange under the symbol MSA. Financial Highlights MSA’s ongoing commitment to investing in core products and focus on managing costs helped generate a strong finish in 2010. 2008 2009 2010 ANNUAL SALES FOR THE YEAR (thousands, except per share) BY PRODUCT GROUP Net sales $ 1,134,282 $ 909,991 $ 976,631 14% 16% Net income $ 70,422 $ 43,295 $ 38,104 19% 26% Basic earnings per common share $ 1.98 $ 1.21 $ 1.06 25% AT YEAR END (thousands) Head Protection (Helmet, Eye, Face & Hearing) Total assets $ 875,810 $ 875,228 $ 1,197,188 Gas Detection Instruments Supplied- Air Respirators Working capital $ 258,088 $ 265,575 $ 295,648 Air-Purifying Respirators Fall Protection & Other Common shareholders’ equity $ 392,841 $ 435,691 $ 450,443 Common shares outstanding 35,786 35,973 36,520 ANNUAL SALES BY REGION 9% 2% 8% SALES NET INCOME 10% 41% $1,134.3 $70.4 $976.6 24% $910.0 6% $43.3 $38.1 United States Mexico & Canada Europe Asia & Pacific Rim Africa South America 2008 2009 2010 2008 2009 2010 Middle East & India MSA 2010 ANNUAL REPORT 1 To Our Shareholders, Bill Lambert holds an Altair 4X Detector in the lobby of the newly Customers and Associates: renovated MSA Corporate Center in Cranberry Township, Pa. If someone had asked me at this time last year what I thought I might be writing today about MSA’s performance in 2010, I would probably have said that I would expect this letter to include such phrases as “marginal improvements,” “a period of investing in our future,” and “continuing to stay the course toward future success.” Instead, I am here to tell you about a year that was far stronger They led us to a highly effective product development year, than any of us could have anticipated at the time, one that saw featuring the launch of one of our most exciting and successful both our revenues and our gross profits climb continually — new products in recent memory — the XCell Sensor Platform — often dramatically — each quarter as the year went on, leading from both a technology and profitability perspective. to a fourth quarter that demonstrated 21 percent sales growth They led us to create an even more customer-focused year-over-year, and a full-year 2010 in which MSA posted the organization, as we tied every North American employee’s third highest sales level in our 96 year history. compensation directly into our goal of strengthening customer What got us here? We stood by our core values and we drove loyalty by improving customer satisfaction. our strategy hard, and those actions led us to a number of And, they drove us to remove significant cost from our good results. business, including the successful completion of our footprint They led to a re-emphasis on our core products, including an consolidation and optimization strategy in North America, unprecedented, game-changing investment in the expansion of and meaningful implementations of that strategy in Europe our fixed gas and flame detection instrument line, making us the and Asia. market leader in this fast growing segment, and positioning us All in all, these efforts, and many others, left us in a healthy to seize significant new market share in the future. position to seize the day once the economy began to turn. They led us to focus resources on key emerging markets, helping In 2010, we saw our core industrial market begin to recover MSA operations in Brazil, Argentina, Chile, Peru and Colombia decisively throughout most of the world, and smaller pockets of set new records in both sales and profits, and pushing revenues strength emerge in fire service and military markets. And seize in China up 14 percent on the year. the day we did. 2 MSA 2010 ANNUAL REPORT NET SALES (2001-2010) $1,134.3 $990.3 $976.6 $913.7 $907.9 $910.0 $852.5 $696.5 $564.4 $509.7 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Despite the effects of the economic recession of 2009 and subsequent recovery, 2010 marks the third highest year in Net Sales for the company. Pleasing customers, booking orders As many MSA stakeholders are aware, our strategic plan focuses greater battery run time, provide significant lifetime cost savings and most strongly on four core product lines: Industrial Head Protection, even survive a fall of 20 feet and keep working — are right in line with Supplied-Air Respirators, Portable Gas Detection Instruments, and the most desired customer needs, leading to a premium product at a Fixed Gas and Flame Detection Systems, or what we often refer to very competitive price point. as Permanent Instruments. And, with this increased focus, three of In hard hats, we captured these four product groups demonstrated strong year-over-year sales enough orders that our growth all around the world, with industrial head protection products market share in North America up 28 percent, portable instruments up 23 percent, and permanent increased to almost 60 percent, instruments up 12 percent, which does not include revenue from our making us not only the leader acquisition of General Monitors of Lake Forest, California, which is in the category, but truly the highlighted on the pages following this letter. industry benchmark as well. What’s interesting looking at some of our 2010 order highlights is And, we’ve opened up new their size. Many of our “big” orders were smaller than in years past. geographic markets for our Perhaps they represent the caution many customers exhibited in flagship V-Gard Hard Hat line, 2010 as they slowly gained confidence in the economy. In any case, making inroads throughout V-Gard® Hard although the average order for MSA products was smaller, there were Europe, and enormous strides Hat production in Suzhou, China obviously enough of them to allow us to reach the strong sales totals in China, where in 2010 we that defined 2010. achieved for the first time annual production and sales exceeding one million V-Gard Helmets. For example, in portable and permanent gas detection instruments, More impressively, we reached that milestone in late November, with we saw orders such as a $1 million booking from the India Oil & more than a month to spare! Natural Gas Commission for our Suprema Detection System. We also received a $2 million order from the U.S. Navy for a Many of our larger orders in 2010 were broader contracts specifying a customized Ultima X Detection System; and a $2 million order from variety of personal protective equipment cutting across product lines, QWEST Telecommunications for our new hand-held Altair 4X such as a $9 million order from the New York City Police Department, Multigas Detector.